By Anthony Harrington
After two years of dogged wrangling, mainly to block China's ambitions for control, the new BRICS bank was announced as a reality at the sixth BRICS summit in the north eastern Brazilian city of Fortazela. With Vladimir Putin, India's recently elected Prime Minister Narendra Modi, Brazilian President Dilma Rousseff, China's President Xi Jinping and the South African President Jacob Zuma, beaming collectively for the cameras, the five BRICS leaders told the assembled press that the new bank has been capitalized with $50 billion, with equal contributions from all five.
China had argued long and hard that contributions to the new bank - an alternative to what the BRICS say is the overly Western dominated IMF and World Bank - should be based on economic strength. But since voting rights follow contribution levels that would have given China control of the New Development Bank (NDB), its official name. Both India and Brazil resisted Chinese demands strenuously and the Indian press is treating the outcome as a tremendous victory for the new Prime Minister in his first multilateral engagement since his election in May.
The five leaders also announced that the new bank would be based in Shanghai, which doubtless pleased the Chinese, who in turn conceded that India would preside over the NDB for the first six years of its existence, followed by terms for Brazil, then Russia. The fact that Modi went home with both a new bank and its presidency in his luggage got his tenure as Prime Minister off to an excellent start.
The five have also pledged to back the NDB with a further $100 billion to act as a currency reserve pool should any member hit liquidity issues. The NDB's role will be to fund infrastructure projects in emerging nations, a role that the World Bank and the Asian Development Bank already play to a very significant extent across Africa and Asia. However, the presence of another funder with a real incentive to lend will doubtless be seen as a blessing to any developer or region with a major infrastructure project that needs to be got off the ground.
The NDB initiative was first mooted in Delhi in 2012, and represents a fairly stunning victory for the BRICS, who have been saying for some years that they want and deserve a bigger say in the global scheme of things.
As NDTV notes in a recent article, the current global financial order is very much a product of the big western powers in the period post the Second World War. The NDB takes its place as part of a concerted push by the BRICS and Asia generally to do something to formalize the shift in the economic tide from west to east. The Holy Grail, of course, would be for the BRICS in general and China in particular, to succeed in their stated objective of finding an alternative global reserve currency to the US dollar. By comparison with that objective, this is a fairly small step, but it remains a highly significant one. If it can help to overcome Africa's chronic infrastructure deficit, for example, then the creation of the NDB will turn into a real blessing instead of being merely the BRICS' way of cocking a snook at the IMF and the World Bank.